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In this paper, the authors test how firm sizes and financial surpluses and deficits affect the pecking order theory's explanation power based on Shyam-Sunder and Myers's basic model. The authors find that, for both financial surpluses and deficits, firm sizes cause asymmetry when testing the pecking order model, pecking order coefficients generally increasing along with firm sizes. We also find that surplus coefficients are obviously larger than the corresponding deficit coefficients, indicating that the pecking order theory is more applicable when firms have financial surpluses.
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